EU orders Google to break up ad tech model for ‘abusing its dominant position’

The European Union’s antitrust regulators have targeted Google’s highly successful advertising technology model and asked the United States-based tech giant to address its concerns over anti-competitive practices, on Wednesday (June 14). Additionally, the European Commission has also threatened the company with its harshest regulatory penalty to date.

What did the EU say about Google’s practices?

The 27-nation bloc’s executive branch and top antitrust regulators have set out charges against Google two years after opening an investigation into the tech giant’s behaviour over favouring its own advertising services. In line with this, the EU on Wednesday said Google has “abused its dominant positions” over ad tech to crush the competition.

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The announcement was made by EU antitrust chief Margrethe Vestager, on Wednesday, who called for Google to sell part of its ad tech business citing the investigation she believes that a behavioural remedy would not be effective at stopping the tech giant’s supposed anti-competitive practices.

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The commission said its preliminary view after the investigation is that “only the mandatory divestment by Google of part of its services” would satisfy the concerns it holds about the company’s advertising practices.

“Of course, I know this is a strong statement but it is a reflection of the nature of the markets, how they function and also why a behavioural commitment seemed to be out of the question,” said Vestager, at a press conference.

In line with this, the EU antitrust chief also suggested that “Google could divest its sell-side tools, DFP and AdX. By doing so, we would put an end to the conflicts of interest.” The move could have far-reaching implications for the tech giant, potentially resulting in significant fines and regulatory action.

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The Commission has also said Google’s favouring of its own online services is detrimental to those of competing providers of advertising technology services, advertisers and online publishers.

What’s at stake for Google?

The stakes are high for Google as its ad tech business accounted for 79 per cent of its total revenue last year. Meanwhile, the fine against the company is reported to be as much as 10 per cent of Google’s annual global turnover.

It is also worth noting that Google, according to research firm Insider Intelligence, is the world’s dominant digital advertising platform with a 28 per cent market share of global ad revenue. Last year, Google’s total advertising revenue amounted to $224.5 billion, reported Reuters.

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Meanwhile, the EU will continue to investigate the tech giant’s introduction of a privacy sandbox set of tools which reportedly block third-party cookies on its Chrome browser and its plan to stop making the advertising identifier available to third parties on Android smartphones, said Vestager.

This also comes as the EU has recently expanded its crackdown on big tech companies including Facebook parent company Meta and Google with fines amounting to billions of dollars.

How has Google responded to these accusations?

In response to these charges, Google has said that it disagrees with the commission and will respond accordingly. In a statement, Dan Taylor, Google’s vice president of global ads, said “The Commission’s investigation focuses on a narrow aspect of our advertising business and is not new. We disagree with the EC’s view.”

EU vs Google: An ongoing saga

Earlier, the EU launched an investigation against Google back in 2021, which aimed at examining whether Google obstructed rivals’ access to user data for online advertising and if it unfairly ring-fenced data for its own use.

This also comes as Google is actively contesting antitrust fines imposed by the EU in court, including a landmark penalty of 4.34 billion euros ($4.7bn) for its management of the Android mobile operating system, which it is currently challenging in the highest court within the EU.

(With inputs from agencies)

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